Softbank offers much-needed investment to the still struggling No. 3 U.S. wireless operator. But Dish doesn’t just bring cash; it’s got 4G spectrum and a huge pay TV network to boot. Informa Telecoms & Media Principal Analyst Mike Roberts lays out all of the advantages of a Sprint-Dish marriage:

“First and most importantly, Dish could combine its 2GHz LTE spectrum with the LTE spectrum of Sprint and Clearwire to build one of the strongest LTE spectrum portfolios in US, which would be the foundation for a powerful new competitor in the US telecoms market. Second, using Sprint’s newly-modernized mobile network would give Dish a cost-effective way to deploy LTE in its 2GHz spectrum and meet the FCC’s rollout requirements. Third, if the deal goes ahead, Dish and Sprint could quickly offer TV, broadband and mobile bundles to compete more effectively with larger integrated telecoms players such as Verizon and AT&T.”

In particular, Dish’s spectrum would give Sprint the immediate room it needs to grow its LTE capacity. Sprint’s current LTE network is bit undersized compared to high-capacity 4G networks its competitors are rolling out. While Sprint is planning to buy the remaining stake in Clearwire — which would give it Clearwire’s vast 2.5 GHz holdings — Clearwire is using a different type of LTE technology that could make getting the right consumer devices more difficult. Becoming part of Dish would give it the right kind of licenses to complement Sprint’s current network.

Also, Sprint taking over Clearwire isn’t a given. Several other companies have expressed interest in the 4G operator and its spectrum, and last week Clearwire revealed it just got a new offer from an unnamed entity to acquire its licenses in big cities for between $1 billion and $1.5 billion. The Wall Street Journal pegged that unnamed company as Verizon Wireless.

Given all of the crazy variables in this complex game of spectrum chess, it seems like a Sprint and Dish would form a good match, but the companies haven’t always seen eye-to-eye.

There was once talk of a partnership between the two, using Sprint’s new networks to host Dish’s LTE service. But those talks fizzled, and Sprint and Dish wound up becoming big adversaries, fighting over Clearwire’s future and squabbling about interference issues in their spectrum neighborhood.

Copious amounts of money certainly can heal old wounds, but there’s a question of whether Dish has enough money. Despite Dish’s big war chest, it would still need to go $9 billion further into debt to finance its proposed deal, Stifel Nicolaus analyst Christopher King said in a research note. Dish may have just set off a bidding war, but it might not have the money to see it through. According to King:

“We believe that DISH is more strategically desperate for Sprint than is SoftBank; however, SoftBank certainly has deeper pockets. … As such, we believe SoftBank is in a better position, financially speaking, to match DISH’s offer – or raise the offer further – should it choose to do so. It appears to us that Sprint is in a solid position from a negotiating standpoint.”

If the money’s right, Sprint may not care about any of the strategic advantages of a Dish deal. As with all carriers, Sprint’s foremost concern is spectrum and Sprint may be in a position to acquire better licenses with Softbank’s cash.

Last week, the U.S. Department of Justice advised the Federal Communications Commission to set rules for its forthcoming TV airwaves auction favoring smaller operators like Sprint and T-Mobile over dominant carriers AT&T and Verizon. If FCC does give Sprint an advantage in that auction, it could walk away with some very attractive 600 MHz airwaves without breaking the bank.

Chess photo courtesy of Shutterstock user Elnur

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For those of you unfamiliar with Softbank’s massively successful advertising campaign in Japan, Otosan is the canine patriarch of the (human) Shirato family, which also includes Japanese wife Masako, Japanese daughter Aya and African-American son Kojiro. Trust me, it gets even weirder.

Here’s a typical Softbank commercial in which Otosan attends his high-school reunion:

And here’s another, advertising the iPhone:

Despite the success of the Shirato campaign, Softbank has branched out into other equally bizarre but compelling advertising themes. It’s hired Brad Pitt (who can afford Brad Pitt?) as well as film auteurs Wes Anderson, Spike Jonze and Wong Kar-wai to do a series of brand promotion commercials.

Here’s Wes Anderson’s collaboration with Pitt:

And here’s Spike Jonze’s contribution:

But it all comes back to Otosan. Here’s a fun experiment. Try watching this popular ad featuring the Shirato family and Tommy Lee Jones without the subtitles.

Confused? Now try watching with the subtitles. It makes even less sense (unless you happen to be familiar with Jones’ work as a spokesman for Japanese coffee brand Suntory Boss).

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On Jan. 20, Boost Mobile, one of Sprint’s prepaid brands, will start throttling its so-called unlimited plans after customers surpass 2.5 GB a month, according to a company Facebook post first spotted by FierceWireless. Sprint’s unlimited contract plans will remain unthrottled – a strategy CEO Dan Hesse has stressed is key to differentiating Sprint from the competition – but now both of Sprint’s primary prepaid services, Virgin and Boost, will have usage restrictions.

Broadband Reports confirmed that Clearwire is now experimenting with usage-based pricing plans in 10 cities, selling customers 2 GB a month for $20, 4 GB for $40 or an unlimited package for $60. The 10-city trial aside, all of Clearwire’s current plans are marketed as unlimited, but many customers have complained that throttling policies have kicked in at seemingly arbitrary usage levels.

It’s not clear whether the WiMAX operator maintains those same throttling policies on the new more expensive “unlimited” plan, but considering many Clearwire customers use the service as their primary residential broadband connection, it’s likely throttling will remain in play.

True unlimited plans are becoming harder and harder to come by. AT&T and Verizon both began throttling their grandfathered unlimited customers last year, though neither has set a specific soft cap. New customers have no choice but to choose a tiered or family share plan (in Verizon’s case shared plans are really the only option).

MetroPCS has kept an unlimited plan, though it raised its price. T-Mobile is the one bright spot for unlimited enthusiasts. After getting rid of its unlimited plans last year, it reintroduced them this summer, but they do come with more restrictions than its soft-capped plans, for instance: no using your phone as a hotspot.

Buffet image courtesy of Flickr user Wesley Fryer

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The fates of the two companies have been intertwined since Sprint merged its WiMAX operations and spectrum with Clearwire in 2008, but their relationship goes back further and is built on much more than just a business arrangement. Clearwire and Sprint had starry-eyed visions of creating a new kind of mobile network and carrier.

2006: the year 4G became a thing

On August 8, 2006, then-Sprint CEO Gary Forsee announced that Sprint would adopt a little known technology called Mobile WiMAX for its fourth-generation mobile data network. 4G was a new — and many would argue a much misused — term at the time, but as Sprint’s plans began to unfold it became very apparent it was viewing WiMAX not just as a generational shift in technology but as new model for operators to sell mobile data services.

Led by then CTO Barry West, who would become WiMAX’s chief evangelist, Sprint proposed selling a pure mobile IP connection, following the model of an ISP, and letting any device makers or any application developer ride over that connection.

The choice of WiMAX as the delivery mechanism was also significant since it came out of the Institute of Electrical and Electronics Engineers (IEEE), rather than the wireless industry’s traditional standards bodies. WiMAX’s big backers came from tech — Intel and Google — not from telecom, and they wanted the future mobile Internet to be built on internet principles, not carrier ones.

Meanwhile, a wireless ISP owned by mobile industry pioneer Craig McCaw was getting similar notions. Clearwire was using fixed wireless technologies to deliver residential broadband service in smaller cities all over the country. In WiMAX, Clearwire saw a way to transform the an ISP into a mobile broadband carrier. It also happened to have built up a big collection of licenses in the same 2.5 GHz band over which Sprint was planning to deploy its network. It was only a matter of time before these two got together.

One big missed opportunity

Both operators danced around one another for two years, neither committing to a large-scale WiMAX deployment while they negotiated their eventual merger pact. Incoming CEO Dan Hesse inherited a financially strapped Sprint still reeling from its acquisition with Nextel. As he acknowledged in an in-depth interview with GigaOM this week, Hesse had two choices: either strike a deal with Clearwire or mothball WiMAX completely.

In May of 2008, the companies negotiated deal that combined both their WiMAX operations under the Clearwire umbrella and brought in a $3.2 billion investment from Intel, Google and several cable companies. The deal closed in December of 2008 at which point the combined Clearwire only had two WiMAX markets to its name: Baltimore and Portland, Ore.

Supposedly WiMAX had one other big advantage: it was well ahead of competing 4G technologies in development. Sprint and Clearwire felt they had years before their competitors could get LTE networks off the ground, and they were right. The first LTE network wouldn’t launch in the U.S. until 2010. Both companies essentially had a four-year head start, but they squandered their time-to-market advantage.

Clearwire rolled its network slowly in 2009, but in 2010 it made a big push, going live in some of the countries biggest cities. But after it brought San Francisco online on Dec. 28, 2010, its expansion ground to halt with only about one-third of the U.S. population covered. It just ran out of money.

Sprint’s first WiMAX phone, the HTC EVO 4G, went on sale in the summer of 2010. A few months later MetroPCS launched the first U.S. LTE network and phone. And that December, Verizon began its juggernaut rollout of LTE nationwide. Verizon’s first LTE phone, the HTC Thunderbolt went on sale in March of 2011. Sprint’s four-year head start had been whittled down to nine months.

The waiting game

Clearwire has basically been a holding pattern for the last two years. It’s announced all kinds of grand plans, such as its intent to build a new LTE networks alongside of WiMAX, but without funds it hasn’t been able to execute. Sprint has kept Clearwire afloat and has even fronted the initial funds needed to begin a limited LTE rollout. But until today’s big acquisition announcement, Sprint has been keeping Clearwire at arm’s length.

The global WiMAX ecosystem has pretty much collapsed, leaving Clearwire with one big asset: the single largest swath of 4G spectrum in the U.S. Sprint now has money thanks to its newfound benefactor Softbank, and given Clearwire’s hobbled state Sprint can buy the company at a bargain price. After four years, Sprint probably feels its time to take that spectrum back – or at least prevent anyone else from getting their hands on it – and resume its grand 4G project once again, this time with LTE.

 Featured photo courtesy of Shutterstock user Yuri Arcurs

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Sprint’s acquisition of Nextel two years earlier was a heavy albatross around its neck. Its customer service had gone down the tubes, employee morale was low, and the company culture fractured; worst of all, Sprint’s once loyal subscribers were fleeing in droves. Hesse knew he was taking over a struggling company, but in an interview with GigaOM he admitted that even he didn’t realize the magnitude of Sprint’s troubles until he arrived. “When I took over the assignment the problems were more severe than I anticipated,” he said.

Hesse staring in one of many Sprint “Simply Everything” commercials

Fast forward five years, and it’s plain to see Sprint has turned several corners. Its net subscribers totals are increasing rather than shrinking, helped along by the iPhone. Its improved financials have sent Sprint’s stock skyrocketing, its share price more than doubling in value in the last year. Its customer service is now consistently scoring the highest marks in surveys conducted by J.D. Power and other agencies.

Sprint hasn’t fully recovered from the dark days of the last decade. Seven years after the merger it’s still dealing with the fallout of Nextel, it still has more work to do to repair its brand, and during the several years Sprint was healing its wounds, its biggest competitors AT&T and Verizon Wireless took advantage of Sprint’s problems to become bigger and more formidable.

But it’s fair to say there’s a lot more upside than downside to Sprint these days. Japan’s Softbank certainly thinks so. It’s investing $20.1 billion to take control of the country’s third largest carrier.

A few days before his fifth anniversary at Sprint, Hesse sat down with GigaOM to discuss his tenure as CEO and the five years of trials and tribulations Sprint has endured on its path to recovery.

Why AT&T is to thank for Sprint’s new identity

We asked Hesse what the most significant moment of his tenure was, and we were surprised by the answer: AT&T-Mo.

“The most important decision that has been made in the five years I’ve been here was the decision to fight the acquisition of T-Mobile by AT&T,” Hesse said. “It fundamentally defined the industry, which in turn defined Sprint in terms of who we are is and what our role in the industry is.”

Echoing thoughts he gave in an interview with GigaOM last year, Hesse said that the AT&T’s failed attempt to consolidate two of the Big 4 made him realize that there was no longer such a thing as the Big 4. The industry had bifurcated into the Big 2 and everybody else.

“Through a combination of acquisitions of spectrum and acquisitions of other companies, as well as organic growth, AT&T and Verizon together became a much larger percentage of the overall wireless market,” Hesse said. “Five years ago I wouldn’t have called them a duopoly. Today they’re darn close. If AT&T had been allowed to acquire T-Mobile than we would have clearly had a duopoly.”

Sprint can’t take credit for killing AT&T-Mo, though its vociferous opposition to the deal likely influenced the Federal Communications Commission and Department of Justice’s decisions to quash it. More significantly, the deal helped shape Sprint’s identity. Hesse said it made Sprint realize that many of its interests were now more closely aligned with smaller competitive carriers rather than the Big 2.

Sprint began defining much of its strategy by focusing on services and policies the market was demanding but AT&T and Verizon weren’t delivering. Ma Bell and Big Red killed unlimited plans. Sprint embraced them. They concentrated on contract plans. Sprint dived whole-hog into prepaid. While Verizon and AT&T are still keeping mobile virtual network operators (MVNOs), Sprint has become a hero to the virtual operator. Sprint had started down that path before AT&T-Mo ever happened, but Hesse said the attempted merger reinforced the notion Sprint was on the right track.

While AT&T-Mo’s approval would have stifled competition, it’s failure had the opposite effect. The government has made its position clear: it wants to see strong third-and fourth-place operators to keep the Big 2 in check, and that has spurred new interest in the likes of Sprint and T-Mobile.

“Investment into the U.S. wireless industry would dry up if you had a government sanctioned wireless duopoly,” Hesse said. “Softbank has said publicly it wouldn’t have invested a thousand dollars in the U.S. if that merger had gone through.”

The Nextel problem

The biggest problems Hesse has been forced to fix were not of his own making. When he took over in late 2007, his predecessors had made two significant decisions that still haunt the company to this day: the acquisition of Nextel and the embrace of WiMAX as Sprint’s future 4G technology.

“With 20/20 hindsight, the Nextel merger was a mistake,” Hesse said. “The synergies, if you will, that we had hoped for and planned for didn’t materialize.”

In fact, Hesse may be just a few months away from shedding that Nextel albatross for good. June 30 is the date he’s set for shutting down Nextel’s iDEN network, at which point Sprint will start refarming its airwaves for LTE. It will be a painful six months. There are still 3.1 million Nextel and Boost Mobile subscribers on iDEN, many of them clinging to the Direct Connect push-to-talk service that originally made Nextel so popular. So far, Sprint has been able to convert a fair amount of iDEN customers into CDMA customers, though, and has managed to attract 1 million subscribers to its new CDMA version of Direct Connect.

As for WiMAX, Hesse isn’t quite ready to call it a failure, even though the rest of the wireless industry has dismissed it. Hesse isn’t blind. He knows LTE is the future — and Sprint is in the early stages of a nationwide LTE rollout — but Hesse also maintained that Sprint got more out of WiMAX than the industry gives it credit.

“One of the big decisions I had to make early on whether to mothball and shut down the WiMAX business and take a big write off,” Hesse said. At the time Sprint simply didn’t have any money to invest more in a new network strategy, Hesse said. Its choices were making its fateful deal to merge WiMAX operations with Clearwire — or do nothing at all. The Clearwire deal did give Sprint the country’s first 4G network, though lack of funds prevented Clearwire from completing more two-thirds of its network, and Verizon Wireless quickly caught up with LTE.

“Time will tell,” Hesse said. “It’s too early to say whether [WiMAX] was a good call or a not so good call.”

A lot of history’s judgment will probably be based on the eventual fate of Clearwire. A day after our interview with Hesse, Sprint made a bid to buy out Clearwire completely. (Update: Sprint and Clearwire revealed on Monday that the Clearwire board has agreed to a $2.2. billion takeover deal.)

Becoming the carrier that isn’t hated

If Hesse wants Sprint to be perceived as one thing, it’s as “the good guy” in the U.S. wireless industry. While AT&T and Verizon Wireless increasingly make moves that go against the desires of their customers and trends in technology, Hesse said, Sprint will try to become the most pro-consumer and open carrier out there.

Hesse (third from left) and the CEOs of AT&T, Verizon and T-Mobile at CTIA Wireless

There are the big ticket items, such as pricing structures like its unlimited data Simply Everything plans. But there are small moves as well, such as opting to use Google Wallet as a mobile payments solution, rather than inject itself forcibly into the NFC commerce chain. It’s also tried to claim the mantle as the country’s greenest operator.

Still, Sprint is having a hard time explaining its new role to consumers. Hesse said that its current customers know the new Sprint and like what they see, as indicated by its stellar rise in the consumer survey rankings. But for customers who have never owned a Sprint phone or left angrily during its rebuilding period, the name Sprint still has plenty of negative connotations.

“A brand can be tarnished very quickly, but it takes a long time to rebuild it,” Hesse said. “That’s the issue we had. The company had let the customer service and customer experience deteriorate, and we really have to work hard to change that perception. … We have changed the perception of Sprint customers very quickly because they have noticed how much we’ve improved. It’s more difficult to change the perceptions of non-customers.”

Sprint logo photo courtesy of Shutterstock user Susan Law Cain

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Update: DT and MetroPCS have confirmed they’re in talks to combine to US operations. From Metro’s statement: “There can be no assurances that any transaction will result from these discussions, and the Company does not intend to comment further unless and until an agreement is reached.”

In May, when rumors first arose that DT would buy MetroPCS, I tried to debunk them, pointing out how the deal made no sense. I may be wrong about the rumors being false, but that doesn’t make the deal any less crazy. Merging T-Mobile, a GSM operator, with MetroPCS, a CDMA one, is absolutely insane.

The last operator to have this kind of bright idea was Sprint when it bought Nextel in 2005. At the time it was considered a mega-merger, but it didn’t change the fact Sprint was forced to run two distinct networks: its original CDMA infrastructure and Nextel’s iDEN systems. It had to maintain separate largely incompatible handset portfolios and manage two separate customer bases. We all know how that turned out, but let’s highlight some of the gorier details:

• When the deal closed the combined Sprint-Nextel had 43 million customers and 22 percent of the US mobile market share. In seven years Sprint has grown by only 13 million subscribers, while its two biggest competitors, AT&T and Verizon have both doubled in size. Sprint’s share of US connections has shrunk to less than 17 percent.
• Sprint hasn’t turned a yearly profit since it bought Nextel. That’s seven years of annual losses, while customers fled in droves from the Nextel network. Sprint CEO Dan Hesse says he believes Sprint will finally be profitable again in 2014, which happens to be the year after all traces of the Nextel iDEN network are wiped from the map.

T-Mobile and MetroPCS have two things in common: they use the same spectrum bands and they’re both coalescing around LTE as their future network technologies. You could make the argument that eventually these two operators will be technologically in tune offering a unified LTE service. But that transition will take years.

T-Mobile won’t launch LTE until 2013, and while MetroPCS has had 4G live since 2010, the vast majority of its subscriber base is still on its CDMA network. A combined ‘T-Metro’ would be a joint CDMA-GSM operation for years to come. That means enduring many years of operational hell and likely financial losses trying to juggle two separate sets of customers and managing three separate networks.

As for spectrum, MetroPCS has some attractive licenses, particularly in key metro markets like New York City and San Francisco. With its new network overhaul, T-Mobile maintains it’s in a solid spectrum position, but like any carrier it’s on the lookout for strategic opportunities to expand its holdings. Harvesting MetroPCS for its spectrum strikes me as a deal done in desperation, not one of strategy.

T-Mobile could shut down Metro’s CDMA networks completely and refarm their bandwidth for LTE and HSPA. But that would mean letting go of the lion’s share of Metro’s 9.3 million customers. Sure, T-Mobile could offer to switch out those customers’ CDMA phones for GSM-HSPA devices, but it would also require contracts to ensure those customers didn’t immediately bolt. There’s a flaw in that strategy, though: MetroPCS is a prepaid provider, and one of the primary reasons its customers are its customers is because they don’t want contracts.

Paying multiple billions of dollars just so T-Mobile can get its hands on a handful of licenses makes no sense. And T-Mobile has demonstrated there are plenty of other ways to get spectrum for far cheaper. Since its planned merger with AT&T died, T-Mobile has brokered a number of shrewd deals to get the airwaves it needs to launch LTE and increase its 3G capacity. As regulators scrutinize the increasing spectrum holdings of AT&T and Verizon more closely, T-Mobile will only be the beneficiary.

T-Mobile has plenty of spectrum options beyond buying MetroPCS outright, while actually trying to merge the two companies operationally would be a catastrophe. This deal may very well happen, but it will be a disaster in the making.

T-Mobile image courtesy of Flickr user swruler9284; Sprint photo courtesy of Shutterstock user Susan Law Cain; MetroPCS mage courtesy Flickr user Jeremy Brooks.

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Sprint managed to re-sign 60 percent of those departing Nextel customers to Sprint contracts or to one of its prepaid brands. It also lured 600,000 new subscribers from other carriers with its unlimited iPhone plans and saw more gains from its thriving prepaid and mobile virtual network operator (MVNO) business.

Nextel, which uses iDEN technology rather than the Sprint CDMA network, has been shedding customers for years, but in the second quarter that trend accelerated when Sprint announced it would sunset the aging network in 2013 and stopped selling new iDEN phones. Sprint has already taken 9,600 iDEN sites off air, thinning its network capacity by a third while still maintaining its original coverage footprint, Sprint Network Operations and Wholesale President Steve Elfman said at the company’s earnings call Thursday.

Consequently, 688,000 Nextel and 310,000 Boost subscribers tossed their iDEN phones to curb in the quarter. CEO Dan Hesse said it is much cheaper for Sprint to convert an iDEN customer to CDMA customer than it is to acquire a new customer from a competitor. That led Sprint to focus its marketing spending in the second quarter on moving Nextel subscribers onto Sprint contracts. Of Sprint’s 442,000 new contract CDMA customers in the quarter, 431,000 were former Nextel customers. In addition, of its 451,000 new prepaid customers, 143,000 traded iDEN for CDMA. Hesse, however, warned that Sprint doesn’t expect that high rate of conversion to continue.

The iPhone was also a growth driver for Sprint. It sold 1.5 million iPhone 4 and 4S devices in the quarter, but most significantly, 40 percent of those activations were new customers to Sprint. Though AT&T and Verizon Wireless sold many more iPhones during the quarter, Sprint didn’t experience the same seasonal dip in sales as its competitors — it sold 1.5 million iPhones in the first quarter as well. While consumers aren’t exactly flocking to Sprint’s unlimited iPhone plans in droves, the device coupled with its liberal data pricing is proving to be a steady customer lure.

Sprint also added 388,000 wholesale and affiliate customers, mainly from its MVNO deals. Sprint has become a big destination for virtual operators attracted by its more flexible pricing policies and willingness to share all of its services, including LTE. Though Sprint only receives a fraction of the revenue from a wholesale customer as it would from a contract customer, MVNOs account for a big part of its business — of its 56.4 million total connections, 8.4 million, or 15 percent, are maintained by carrier partners.

Sprint only launched its LTE network this month so it hasn’t started reporting LTE subscribers. Sprint started selling LTE phones long before the network went live and has already seeded the market with four smartphones and a modem. The network is only up in five major metro markets and in 10 additional communities, so as of now relatively few LTE device owners have access to 4G speeds. But Sprint is moving quickly. It plans to expand its footprint to 250,000 million people by the end of 2013.

Photo courtesy of Shutterstock user Susan Law Cain

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I’ve always been more of a networks and technology guy than a gadget guy, so the new device launches don’t excite me the way they do my peers. What I like about CTIA is that it brings together a bunch of smart people from interesting companies who are excited by the future of wireless networking.

At CTIA I can sit down with Kyocera to discuss how ceramics can transform phone audio. Then 30 minutes later I’m chatting with the original Symbian creator Psion about its new efforts in open-source hardware, followed by a conversation with startup Mesaplexx about how a tired old cell site component–the radio frequency filter–can be transformed through advanced mathematics (more on those two in a later post).

CTIA is also a great show for measuring the progress of the industry. This year, U.S. operators started discussing small cells and the heterogeneous network in earnest, dragging it out of the labs and demo booths and into the cold light of their network roadmaps. AT&T revealed it will begin rollouts of small cells later this year, but Sprint was even more aggressive, detailing specific plans to install tens of thousands of picocells in buildings and high-traffic outdoor areas in the next two years.

Those small cells will eventually be woven into operators’ macro networks and Wi-Fi networks, creating complex HetNets that allow our devices to connect to multiple nodes – in some cases simultaneously. I don’t want to oversell the concept, but this marks a true transformation in network design, moving away from network topologies focused primarily on coverage to topologies that supply enormous sums of capacity. There are still plenty of obstacles to hurdle before mall cells and HetNet will work, but the important thing is that the operators are now actively trying to overcome them – and technologies like these make CTIA Wireless truly great.

The dark side of CTIA

But there was also plenty about the show that wasn’t so great, namely the politics and the backbiting. AT&T’s very public fight with the Federal Communications Commission carried over into the conference with FCC Chairman Julius Genachowski lashing back at Ma Bell’s accusations that the denial of AT&T-Mo forced AT&T to raise prices (check out Bloomberg Businessweek’s priceless sendup of the argument here.)

The operators took any opportunity they could to foretell the doom of the impending capacity crunch in order to justify their consolidation ambitions. And even some pettiness came out as their CEOs bickered onstage about whose network was fastest and what technologies truly constitute 4G.

While the issues behind those debates are important – the proper allocation of spectrum resources, the effectiveness and performance of different technologies –this was hardly the most elevated forum for discussing them. Trust me, not much was done to further the dialogue.

The problem is the carriers

The biggest problem with CTIA Wireless isn’t its placement on the calendar. Rather, it’s the carriers. CTIA is the trade and lobbying organization for the largest U.S. operators, so those carriers have always set the agenda of their show. That may have worked fine 10 years ago when the carriers were the be-all-end-all of mobile – when they controlled all services and revenue and were largely responsible for mobile innovation. But in recent years, the mobile industry has outgrown the operators.

Third-party developers, big Internet companies like Google and Facebook and device hardware makers like Apple are now just as important as the operators — many would argue more important. Yet CTIA hasn’t evolved to reflect that reality. That’s why the GSM Association – which has a much broader membership and mission – has managed to turn Mobile World Congress into an event of far more importance to the overall U.S. wireless industry. It’s much more inclusive.

CTIA has tweaked the show to give it the appearance of a broader tent. This year it extended keynote slots to companies like Spotify, Mozilla and Electronic Arts, but you get the impression they were being summoned to the feet of kings. Many of the biggest mobile players in Silicon Valley don’t feel they have a place at CTIA, and some long-time CTIA loyalists have decided they no longer need the event: Microsoft, Samsung and Nokia weren’t entirely absent, but none of them exhibited.

I’m not saying the operators have no place at their own show.  The dialogue about small cells and  the launch of new services like AT&T’s Digital Home initiative make the show far more significant than any mere gadget showcase. But the carriers need to lay off their agenda. They need to start talking with the larger mobile industry instead of talking at it. It would help if CTIA would eliminate the self-aggrandizing keynotes the carriers deliver every year.

Last year’s keynote panel of the big carrier CEOs was a big hit because AT&T had just announced its plans to acquire T-Mobile – antics ensued as CNBC’s Mad Money host Jim Cramer pressed them on the merger’s implications. But this year the session returned to its usual lackluster format: Canned questions from Cramer and contrived answers from four guys talking down to the rest of the industry. I didn’t write up the keynotes because there wasn’t any content to cover, but in case you’re wondering, here’s my (rather loose) interpretation of the affair (for a more detailed play-by-play check out Ina Fried’s live blog on AllThingsD):

• T-Mo’s Philipp Humm: I’m the fastest!
• AT&T’s Ralph de la Vega: No, I’m the fastest!
• Verizon’s Dan Mead: Guess how much I can bench press?
• Sprint’s Dan Hesse: LTE Rocks! [winks for the ladies]
• Jim Cramer: Everyone in the Arab Spring used cellphones to text and tweet, ergo cellphones caused the Arab Spring, ergo cellphones create democracy (ignore China). Dan Hesse, how many cellphones are necessary to create democracy in North Korea?
• Hesse: LTE Rocks! [winks for the ladies]

It’s the carriers’ party; they can cry, complain or strut if they want to. But the best parties are those where the hosts don’t make themselves the center of attention.

Blame image courtesy of Flickr user Simone Lovati

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This isn’t the first time that Sprint’s board has expressed dissatisfaction with the direction of Sprint and Hesse’s leadership. Earlier this year Sprint and MetroPCS were reportedly “hours away” from announcing an $8 billion merger agreement, but the deal was thwarted by Sprint’s board of directors; Hesse was reported to have endorsed the deal.

But when it comes to the expensive iPhone deal, could Hesse have done any better? AT&T and Verizon had to go through similar expensive growing pains, too, when they landed the iPhone deal, and all the carriers seem like they’re starting to get fed up.

The idea is that the loss that Sprint (and the other carriers) take on the expensive iPhone subsidies early on will be made up by strong mobile data revenue over many years. For example, as Verizon loses $400 on every iPhone sold, it makes up for that loss and then some through data plans. The reality is that the carriers don’t have much choice when so many customers want the iPhone and are making more money with the iPhone than without it.

Still, when Apple has such a stranglehold on the mobile market, perhaps it’s not surprising that shareholders are channeling some of their angst into the ones leading the ships.

Related research and analysis from GigaOM Pro:
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Deutsche Telekom's and AT&T's CEOs look like the best of friends here, but things have changed since the merger between AT&T and DT's T-Mobile USA failed.

The Rural Cellular Association on Tuesday welcomed its newest member: none other than T-Mobile USA. Even by the largest stretch of imagination, T-Mobile, with its national metro market focus, can hardly be considered a rural operator. But in this age of mega-carriers the distinctions between rural and urban and between nationwide and regional hardly matter anymore. It’s AT&T and Verizon Wireless versus everyone else.

In fact, the RCA’s ranks have been swelling with operators with a distinctly urban grittiness. MetroPCS, which focuses on the country’s largest cities, joined last year, but the kicker was when Sprint’s application was accepted last April. Around that time, the RCA started using “competitive carrier” as a stand-in for “rural carrier” in many of its communications. The reason T-Mobile probably didn’t sign up as well was because at the time it was trying to become a mega-carrier itself, wrangling with U.S. regulators to approve its acquisition by AT&T.

Now that AT&T-Mo has been scuttled, any allegiance T-Mobile once held to its large-operator brethren has disappeared. In the last few months, it’s opposed Verizon’s purchase of the cable operators’ spectrum and lashed out at AT&T for trying to get the spectrum auction rules changed. That’s exactly the kind of heat the RCA likes to deliver against the nationwide operators.

So why are T-Mobile’s and Sprint’s interests suddenly aligned with the rural carriers against AT&T and Verizon? It’s a question of sheer size. As Sprint CEO Dan Hesse put it in a New Year’s post for GigaOM, Verizon and AT&T have grown so large they have ascended to a carrier class of their own, creating a de-facto duopoly in the U.S. mobile market. Meanwhile, according to Hesse, there has been plenty of competitive innovation coming from the smaller players like Sprint and T-Mobile, but the larger Ma Bell and AT&T became the more easily they could ignore the dwindling threat of smaller operators.

If you view the wireless market through that lens, then it makes sense for the rurals to band together with smaller Tier I operators to gang up on AT&T and Verizon — even if “small” in this case means having 55 million (Sprint) or 33 million (T-Mobile) customers. When you’re dealing with two outsized incumbents that collectively connect nearly two-thirds of the U.S. population, large is a relative term.

Related research and analysis from GigaOM Pro:
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• 2012: Data, spectrum and the race to LTE
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